NSW households to pay more for gas

NSW households are set to be slugged with an increase of up to $225 a year on their gas bills as of July 1 as the start-up of LNG exports from Queensland places a squeeze on east coast supplies.

The price hikes recommended by the state pricing regulator IPART on Wednesday have been met with alarm by consumer groups that warn households can ill afford them after years of spiralling electricity prices. Business groups, whose members face even bigger increases, say jobs are at risk.

The increases are on average about 7 per cent lower than those originally sought by
AGL Energy
and
Origin Energy
. But they represent a hefty annual ramp-up of 17.6 per cent, the third straight year of rises in regulated prices.

IPART chairman
Peter Boxall
blamed the increases on rising wholesale prices as the eastern states are linked to the Asian market through new LNG export plants in Queensland. The first of the three projects in Gladstone, worth $70 billion in total, is due to begin shipping gas to China late this year.

“The ability to export liquid natural gas is driving a structural change in eastern Australia’s wholesale gas market, and increasingly domestic gas prices will be influenced by what is happening in world gas markets," Dr Boxall said.

Higher costs for transmitting and distributing gas were contributing to the increase in regulated prices by AGL, the biggest supplier to small customers, IPART said.

Prices set to rise

AGL and Origin had in February pushed for price hikes of up to 20 per cent from July 1. While the increases apply only to the less than 25 per cent of small customers that have not signed up for a competitive contract, they signal that prices on market contracts will also be moving north.

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An AGL spokeswoman pointed out that the 16.9 per cent increase that its customers would see on average from mid-year included the carbon price.

“If the carbon price is removed from 1 July 2014, the increase will be 11.3 per cent instead," she said. “This means a typical residential customer using 23 gigajoules of gas a year, will face an average bill increase of about $2 per week including GST."

The retailers have been warning that prices for gas are being pushed up by increasing costs of extraction, combined with the start of Queensland LNG exports.

AGL managing director
Michael Fraser
has also blamed the slowness of coal seam gas resource development in NSW, where CSG players such as
AGL
and
Santos
have been hampered in their efforts to bring on new supplies.

“The key reasons for this increase are the market price of wholesale gas and network charges," the AGL spokeswoman said.

“Gas produced by AGL in NSW comprises approximately 5 per cent of total NSW consumption. AGL believes that securing more gas supply within NSW will help apply downward pressure on gas prices."

NSW needs more gas

The APPEA oil industry association said the ruling highlighted the urgent need for more gas exploration and production in NSW. Origin, which has no CSG resources in NSW, declined to comment.

The recent surge in power prices has already left an increasing number of NSW households, not just low income and vulnerable consumers, struggling with their energy costs and having to make other sacrifices to pay their bills, said
Oliver Derum
, senior policy officer at the Public Interest Advocacy Centre.

“Not all consumers do have gas but those that do rely on it for things that are very strongly related to comfort and standard of living, such as heating space and water," Mr Derum said.

Gas prices are rising even faster for manufacturers on the east coast, who are sounding the alarm on the risk to jobs.

Australian Industry Group NSW director
Mark Goodsell
said on Wednesday that industrial gas users in the eastern states face a doubling or tripling of wholesale prices, with the impacts to be felt throughout the chemicals, fertilisers, food processing and other sectors.

“Some businesses will be able to pass on their costs to households and other customers, but trade-exposed businesses won’t," Mr Goodsell said. “That means a hit to profits, reinvestment, and ultimately jobs."

AIG used the opportunity to reiterate its call for all future LNG export projects to be subjected to a national interest test to avoid further damage to local energy users.

Calls for intervention

That call was echoed by Greens NSW mining spokesman
Jeremy Buckingham
, who wants government intervention to quarantine some gas for local use.

“No other country in the world would allow its households and manufacturing to be crippled by unrestricted gas exports," Mr Buckingham said. “Australian governments can no longer just leave it to the market, because the market is failing the national interest."

Greens NSW MP
John Kaye
said households need to cut their exposure to rising prices by switching to more renewable energy.

The regulator’s draft ruling on NSW gas prices has been seized upon by the anti-coal seam gas lobby as further evidence of the harm it says CSG is doing to consumers.

Phil Laird
, national co-ordinator for the Lock the Gate Alliance, one of the fiercest opponents to CSG development in the eastern states, said: “It is a terrible outcome for regional communities, who not only have to deal with the damage to land and water from dangerous CSG mining, but now face escalating gas prices in a bitter double blow.

“Gas companies like Origin are making local consumers bear the cost of their plans to pursue world prices and massive profits. IPART is basically proposing to accommodate their profiteering, and NSW regional communities and consumers will pay the cost."

Much smaller price increases, or even some decreases, are proposed for 2015-16. Over the next two years, customers of ActewAGL in the Australian Capital Territory will see the biggest increase of $226 a year on average.

The regulator is due to release its final ruling on gas price increases in June.